Optimism among US homebuilders fell for a second straight month, and some say that's a troubling sign for the economy and the stock market — particularly ahead of the Federal Reserve's widely expected interest rate hike on Wednesday.

The National Association of Home Builders/Wells Fargo Housing Market Index fell in December after a decline in November. The most recent reading, released Monday, makes the two-month decline its largest such drop since 2001, and its second-largest such reading since the measure's creation in 1985, according to a Natixis analysis.

The worst two-month performance was from August to October of 2001, according to Joseph LaVorgna, chief economist for the Americas at Natixis.

"If sustained, the rollover in sentiment is an ominous sign. It remains an open question as to whether Fed policymakers fully appreciate downside risks to GDP growth," LaVorgna wrote in a report on Monday.

"We are fearful the Fed will not pay enough attention to these 'soft' economic figures, because that historically has been the case. However, a sharp decline in sentiment that occurs alongside rapidly weakening stock prices creates the risk for a self-feeding negative feedback loop. We wonder whether Fed Chair Powell and the FOMC notice."

The decline in confidence, according to the NAHB, was due largely to housing affordability. The association's measure rose just slightly in the month of October.

"Builder confidence dropped significantly in areas of the country with high home prices, which shows how the growing housing affordability crisis is hurting the market," Robert Dietz, the NAHB's chief economist, wrote in a report.

Nation Association of Home Builders

The housing space is traditionally quite sensitive to changes in interest rates since the cost of borrowing can impact first-time home buyers' decisions, housing affordability and mortgage rates. Market strategists are convinced some recent economic indicators, including this confidence measure, are going to play a role in the Federal Reserve's commentary this week.

The central bank is expected to hike rates on Wednesday for the fourth time this year, and ninth time since the financial crisis.

"This data definitely didn't help the market today...and it should have an impact on the Fed's decision this week (especially if the Housing Starts data is weak tomorrow)," Matt Maley, equity strategist at Miller Tabak, wrote in an email to Business Insider on Monday.

Maley, who is cautious on the stock market in the long-term, said if housing starts data does indeed confirm weakness within the home construction space, "it would raise the odds that we'll get a 'dovish hike' on Wednesday." Specifically, he'd expect the central bank to announce a rate hike, but with dovish commentary about their rate hikes in 2019.

In another measure of the housing sector's health, one popular homebuilder-tracking ETF (the XHB) has plunged 19% this year.